Canada housing's annual price growth likely to moderate 3% to 4% next year

Canadian housing market has outperformed general economic conditions through the first half of the year.  With the economy in a technical recession, housing activity and new home construction continued to top long-run averages. 

While most of the strength in Canada's hottest housing markets can be attributed to the drop in interest rates at the start of the year, it has generally been viewed as unsustainable. And, momentum from lower interest rates is starting to fade, particularly in markets whose fortunes are heavily tied to commodity prices. 

"Overall, a few more months of above average activity are expected, but then the lagged effects of weaker economic conditions are likely to catch up to housing activity in the fall months. In particular, the correction in Calgary and Edmonton has not run its course and prices could come under further pressure through the end of 2015 and into 2016", says TD Economics.   

The surge in market activity through the first half of 2015 has helped to absorb some of the abundant supply of condos on the market in both Ontario and British Columbia. 

"As such, while annual price growth is expected to moderate to a more sustainable 3% to 4% pace next year, as more balanced market conditions and healthier economies help avoid a deeper slowdown in home sales and prices", added TD Economics.